So, what is a Disabled Discretionary Trust?

It is a legal arrangement whereby assets (money, investments, property and similar things) are managed by trustees for the benefit of others such as people with physical disabilities and learning disabilities.

The assets can include your house.

Discretionary trusts are set up by parents or other relatives as a way of making long term financial provision for a disabled child. The reason a trust is useful is that assets once put in trust do not belong to either the donor, the person or persons setting up the trust (parents for example) or the 'object' of the trust (disabled son or daughter who is intended to benefit).

This means that the capital held in the trust is not taken into account when assessing entitlement to state benefits like Income Support or local authority obligations to fund care.

If parents leave a Will which says words like 'our son hereby inherits our worldly goods' and the goods amount to more than about £3,000 the effect will be to immediately take their son or daughter out of some Social Security means tested benefits. Local Authority (Social Services) support may also cease until the value of the inheritance falls below a threshold level.

In addition, if the disabled son or daughter is unable to manage money then the Court of Protection can get involved. They will appoint a person called a 'receiver' to look after the money and other assets. The receiver may not be the person the disabled person or parents would choose and there are costs involved when a receiver is appointed.

Best Uses

Trusts are used to pay for extra things which Social Security benefits may not fund, such as:

  • a holiday
  • new clothes
  • electrical goods
  • specialised equipment.
  • a trust can also hold, manage and maintain the parental home if put into the trust.

Other reasons for parents to create a trust is to help provide some financial protection into the future because:

  • they fear that the local authority will not always continue to provide care or will provide insufficient care
  • they wish to provide a source of money to 'top up' what a local authority is prepared to pay for care or to obtain better quality or a different care package
  • they want to enable a son or daughter to remain where they are rather than be forced to move to an unknown environment
  • they want to give more choices and options now and, in the future

Property Held in Trust

There are several advantages of holding property in a trust:

Trustees can deal with all the management and maintenance of the property thus if the disabled person is unable to organise this or do it themselves or lacks legal capacity the problem of how to arrange maintenance can be solved.

If in addition money is put into trust over and above the property this can provide a fund to pay for repairs or upgrading the property.

The trustees do not necessarily have to do all the maintenance themselves, they could contract with a local Housing Association or private agency for this service.

 

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